How to Persuade Donors to Support Non-Profits Without the Tax Benefit

What do you do when several potential donors decline to support your cause because you cannot issue tax deductible receipts?

Whether you are raising funds for starving children in sub-Saharan Africa, or a natural disaster, or a grassroots advocacy organization, you always face challenges with persuading donors to give. It could be that they are not emotionally connected to the cause, or that they need more information before they make a donation, or that the timing is just not right for them. At least you can retarget these donors at a later time but the reluctance to donate because of a lack of tax incentives can seem near impenetrable as a barrier for some.

Here I will share what I have learned about the benefits of being a non-profit versus a charitable organization, steps you can take to level the playing field, and offer an example of a successful nonprofit fundraising as inspiration.

Non-Profit vs. Charity: What’s the difference?

As someone who first made a career working with small registered charities, I had a better chance of securing a donation when I emphasized that in addition to supporting an important cause, individual donors would also receive a tax deductible receipt. Now that I work with non-profit organizations that are not registered charities, I’ve often faced rejection by individual donors (and Foundations for that matter), who only want to give to causes that issue them a tax deductible receipt.

According to the Canada Revenue Agency (CRA), charities must be registered and approved by the CRA, and must operate exclusively for charitable purposes1. Non-profits, however, do not need to operate exclusively for charitable purposes; they can operate for social welfare, civic improvement, pleasure, sport, recreation or any other purpose except for profit2. A major advantage of a registered charity to a donor is that it can issue official receipts for donations for income tax deduction purposes. Non-profits, on the other hand, are not registered with the CRA, so they are not able to issue official donation receipts for income tax purposes3.

How can Non-Profits Sustain their Fundraising Efforts?

If you work for or with a non-profit organization without a charitable number, you probably have felt discouraged about how you can compete with registered charities; it’s only natural. There are, nevertheless, many strategies you can explore for your organization that can have a significant impact on your fundraising.

  1. Explore different fundraising avenues – According to Statistics Canada, sources of funding for charitable and non-profit organizations vary significantly, each receiving greater or lesser levels of support in the form of government subsidies, grants, corporate donations, foundation grants, etc4. So if you are raising funds for a non-profit organization, try exploring suitable applications to tap into different fundraising avenues.
  2. Get a better understanding of individual donors – Despite the different fundraising avenues, almost all organizations count on individual donations to fulfil their mission and achieve their objectives5. And it’s individual donors who most often are looking for a tax incentive when making a donation. So try to get a better understanding of them and their motivations for giving6. To inspire donors to give, you need to make a meaningful connection by showing them why they matter and how they can make a difference. When you understand why your donors give, you will be able to make a more effective appeal. If you are able to implement # 3 and 4 below, definitely emphasize these aspects of your non-profit to donors.
  3. Showcase your freedom to act independently – One of your greatest super-powers as a non-profit organization is your ability to act and speak out independently on critical issues. In recent years people have been looking for their donations to make more of an impact7, and get to the root causes of socio-economic or political problems. Non-profit grassroots and advocacy organizations have the ability to do just this. A good example is Greenpeace which is an independent global campaigning organization that acts to change attitudes and behaviour, to protect and conserve the environment and to promote peace. To maintain its independence, Greenpeace does not accept donations from governments or corporations but relies on contributions from individual supporters and foundation grants8. By communicating to donors that your organization’s ability to act independently is critical to achieving your mission and objectives, your donors will feel more inclined to support the important work that they too care so much about, even if that means they will not receive a tax credit.
  4. Take pride in your transparency and accountability – When registered charities report back to CRA, they have to abide by strict guidelines including having their financial statements audited, and most often have their financials posted online. As a non-profit organization, you are not required to do the same type of reporting. I recommend that if you have the capacity and the resources to arrange for audited financial statements, and can post your financials online, then do it! This will be regarded very positively by the category of donors who like to crunch numbers. Be sure to mention that even though you are not a registered charity, you prefer to govern yourselves like one to maintain the utmost transparency and accountability to your donors. They will appreciate the measures your non-profit took to maintain their books and will be more encouraged even though you are not a registered charity. Furthermore, donors may be inspired to give to non-profits if they know their funds are being used appropriately or as requested to.
  5. Take inspiration from everywhere – To get inspiration on what may work for your non-profit, look at examples of non-profit organizations that are in the same sector as you, as well as, those that are completely different. Take Avaaz for example. Avaaz is an online activist network launched in January 2007 that promotes global activism on issues such as climate change, human rights, animal rights, corruption, poverty and conflict9. Since 2009, Avaaz has not taken donations from foundations or corporations, instead, it relies simply on the generosity of individual members, who have now raised over $20m (£12.4m)10. That’s $20 million from regular people who made contributions without the expectation of receiving a tax receipt. Keep in mind that raising money for human rights and advocacy work is one of the toughest types of fundraising out there. It gives me hope for the rest of us, that we too can raise big dollars!